Email this article Adjustment of deferred tax balances in the balance sheet when changing the income tax rate: methodological aspects
- Authors: Aksentev A.А.1
-
Affiliations:
- Kuban State University
- Issue: Vol 21, No 2 (2025)
- Pages: 243-256
- Section: Regional and Sectoral Economics
- URL: https://journals.rcsi.science/2541-8025/article/view/313247
- DOI: https://doi.org/10.33693/2541-8025-2025-21-2-243-256
- EDN: https://elibrary.ru/OHUTKW
- ID: 313247
Cite item
Open Access
Access granted
Subscription Access
Abstract
The purpose of this paper is to disclose the methodological aspects of adjusting deferred tax balances when the income tax rate changes. The paper analyses seven accounting standards (IAS 12; FASB ASC 740; FRS 102; DRS 18; AS 22; SSAP 12; FAS 18/02) in terms of regulation of requirements for accounting for the effect of changes in the income tax rate. Methodological peculiarities of distribution of the effect from change of the income tax rate by components of financial statements are characterised. It is established that at present modern accounting standards are based on the concept of liabilities, in connection with which deferred taxes are accounted for at the rate at which their recovery (reversal) is expected in the future. It has been determined that many foreign developers require the effect of changes in tax rates to be included in profit and loss due to the complexity of allocating deferred taxes to components of financial statements. The exceptions are IAS 12 and FRS 102, where the former permits and the latter sets out the requirement to make the designated allocation. The paper illustrates the problems associated with the application of different methodologies for allocating deferred taxes, including the effect of changes in the tax rate, to components of financial statements. The paper highlights the following controversial issue: how can a ‘net’ deferred tax asset be adequately allocated if it is negative in one component and positive in another? It is concluded that the wording used by the developers of IAS 12 is vague, in connection with which companies can at will allocate / not allocate the effect of changes in the tax rate, which is not proved in the framework of this study and should be considered in a separate paper. Prospects for the development of the research topic are to develop and clarify methods for reasonable allocation of deferred taxes to components of financial statements.
Full Text
##article.viewOnOriginalSite##About the authors
Andrey А. Aksentev
Kuban State University
Author for correspondence.
Email: anacondaz7@rambler.ru
ORCID iD: 0000-0002-0838-4729
SPIN-code: 9601-6154
ResearcherId: AAT-9852-2021
Postgraduate student of the Department of Accounting, Auditing and Automated Data Processing
Russian Federation, KrasnodarReferences
- Black H. Interperiod allocation of corporate income taxes. Accounting research study № 09. New York, AICPA, 1966. 123 p.
- Graham W.J. Income Tax Allocation // The Accounting Review. 1959. Vol. 34. No. 1. P. 14–27.
- Oxner K.M., Oxner T.H., Phillips A.D. Impact of the Tax Cuts and Jobs Act on Accounting for Deferred Income Taxes // The Journal of Corporate Accounting & Finance. 2018. Vol. 29. No. 2. P. 12–21. doi: 10.1002/jcaf.22339.
- Aksent'ev A.A. Valuation allowance on deferred tax assets: practice of creation and utilisation // Bulletin of NSUEU. 2022. No. 3. Pp. 102–127. (in Russ.) doi: 10.34020/2073-6495-2022-3-102-127. EDN: LVPHTX.
- Aksent'ev A.A. Methodological peculiarities of registration of deferred taxes and problems of presentation of relevant information in financial statements // International accounting. 2022. Vol. 25. No. 11(497). Pp. 1225–1260. (in Russ.) doi: 10.24891/ia.25.11.1225. EDN TNZKCW.
- Aletkin P.A. Formation of deferred income taxes in the consolidated financial statements // Bulletin of Cherepovets State University. 2011. Vol. 2. No. 3. Pp. 17–20. (in Russ.) URL: https://cyberleninka.ru/article/n/formirovanie-otlozhennyh-nalogov-na-pribyl-v-konsolidirovannoy-finansovoy-otchetnosti.
- Aletkin P.A. Formation of deferred income taxes in the consolidated financial statements when making investments // International Accounting // International Accounting. 2011. Vol. 14. Iss. 29. Pp. 39–44. (in Russ.) URL: https://cyberleninka.ru/article/n/formirovanie-otlozhennyh-nalogov-na-pribyl-v-konsolidirovannoy-finansovoy-otchetnosti-pri-osuschestvlenii-investitsiy.
- Blaylock B., Shevlin T., Wilson R.J. Tax Avoidance, Large Positive Temporary Book-Tax Differences, and Earnings // The Accounting Review. 2012. Vol. 87. No. 1. P. 91–120. doi: 10.2308/accr-10158.
- Ayers B.C., Jiang J., Laplante S.K. Taxable Income as a Performance Measure: The Effects of Tax Planning and Earnings Quality // Contemporary Accounting Research. 2009. Vol. 26. No. 1. P. 15–54. doi: 10.1506/car.26.1.1.
- Jeter D., Chaney P., Daley M. Joint accounting choices: an examination of firms’ adoption strategies for SFAS No. 106 and SFAS No. 109 // Review of Quantitative Finance and Accounting. 2008. Vol. 30. P. 153–185. doi: 10.1007/s11156-007-0045-8.
- Atwood T.J., Drake M.S., Myers L.A. Book-Tax Conformity, Earnings Persistence and the Association between Earnings and Future Cash Flows // Journal of Accounting and Economics. 2010. Vol. 50. No. 1. P. 111–125. doi: 10.1016/j.jacceco.2009.11.001.
- Phillips J., Pincus M., Rego S.O. Earnings Management: New Evidence Based on Deferred Tax Expense // The Accounting Review. 2003. Vol. 78. No. 2. P. 491–521. doi: 10.2308/accr.2003.78.2.491.
- Aksent'ev A.A. Deferred taxes in Russian and foreign practice: problems and proposals for their solution // Vestnik of Perm University. Series: Economics. 2022. Vol. 17. No. 2. Pp. 221–244. (in Russ.) doi: 10.17072/1994-9960-2022-2-221-244. EDN: RDBKIO.
- Poterba J., Rao N., Seidman J. Deferred tax positions and incentives for corporate behavior around corporate tax changes // National Tax Journal. 2011. Vol. 64. Pp. 27–57. URL: https://www.jstor.org/stable/41862557.
Supplementary files
